subject: Real Estate Loans: Mortgage Bankers Vs Mortgage Brokers [print this page] The mortgage industry has many lenders who play in the real estate game. Some are the banks and corporations who finance millions of dollars every single year to wealthy singles and individuals.
Back in the earlier days the mortgage industry did not have as many competitors involved in it. The process of getting a mortgage involved going to the bank, getting a loan, and then paying it back. Many people sell and buy real estate mortgages in today's market though just like property. Mortgage interest rates are actually determined from the bonds on Wall Street instead of the bankers. There was actually a time period where mortgage brokers were in charge of more mortgages than banks. Recently the market has switched again due to the mortgage meltdown and banks have the majority yet again of the available mortgages.
You may be wondering what the difference is between a mortgage banker, bank, and a mortgage broker? The mortgage banker does not function like a regular bank. These companies loan money directly from their own personal credit lines. They then get sold on the market to other businesses while the mortgage banker gets their credit line available again to repeat the process.
The bank is actually regulated by either the state or the federal government. The deposits with them are insured from the federal government. They get the funds for mortgages by having separate mortgage companies and some do it through their local branches. A few, although rate, keep the mortgages local by allowing you to send your payment directly to them. In most cases though, your mortgage gets sold to others in agencies such as the Freddie Mac (Federal Home Loan Mortgage Corporation) or Fannie Mae (Federal National Mortgage Association). The mortgages are sold as certificates to investors similar to the way that stocks and bonds function.
Mortgage brokers are independent companies. They will offer mortgages from both traditional banks and mortgage bankers alike. They are similar to a retail store for mortgages. Their money is obtained at a much lower rate than what the public can get so they add a small amount of money to get a profit and offers loans to the public. Since they don't have to pay to keep a lot of other processes going, they have a smaller overhead cost. This allows the savings to be passed directly to the borrower and as a result they have dominated the mortgage market for quite some time.
Now that you know how each of these function the question is which one should you work with; a mortgage banker, mortgage broker, or a traditional bank? You can make any of the three work for your situation but mortgage brokers have a larger variety of products to offer to borrowers so they may be more appealing.
The company which you decide to use does not have to directly determine how your loan goes. Your loan officer can be great or horrible no matter where you go. Once you find one that works for you be sure to stick with him or her because they are the number one person you will be working with and you need to be comfortable with them first and foremost. Getting a mortgage involves a large amount of trust with the people you're doing business with. Your loan officer should be very educated and willing to answer all questions you may have about the process or your individual situation as well.
Always compare interest rates between different banks and mortgage bankers and brokers alike. Also beware because some officers may reel you in with a very low rate that isn't really as low as you're getting guaranteed. By the time you realize this, it may be too late to get out of. Always take caution.
